Follow Up

After a 46% Drop, an Opportunity

We were skeptical a year ago about GSV Capital, an emerging-tech closed-end fund—with good reason. Now trading at 50% of net asset value, the shares look like an opportunity. Plus, austerity and ABB, and the death of Alexander Perepilichny.

Technically a closed-end fund, GSV has suffered since its own initial public offering in April 2011, with shares down 46% to a recent $8.07. The stock was still $14 when Barron's took a skeptical look a year ago ("One-Stop Shopping for Zynga, Facebook, and Twitter," Dec. 5, 2011). At the time, shares traded at a premium to net asset value, and we were wary of the frothy private valuations being placed on technology companies.

Facebook's bungled debut has substantially lowered expectations for the next wave of IPOs. Twitter and Dropbox have better business models than Facebook's before its IPO. And while private valuations are notoriously hard to gauge, the company is valuing most of its holdings at or near cost.

At essentially half-price, GSV shares now look like a reasonable play on the technology pipeline. Even one successful IPO could send its stock back toward $10, or more.

-- Alexander Eule

Looking to Restore Power at ABB

Building and upgrading the global energy grid could take $1.5 trillion a year over the next two decades and still not be done, or so predicts the International Energy Agency. That sounded promising to us when we weighed in on the shares of Swiss electrical-engineering giant
ABB abb -0.6134768366869443%ABB Ltd. ADSU.S.: NYSEUSD21.2389
-0.1311-0.6134768366869443%
/Date(1427830706804-0500)/
Volume (Delayed 15m)
:
886475
P/E Ratio
18.88572445710217Market Cap
49737497144.1077
Dividend Yield
2.7067766258246935% Rev. per Employee
280405More quote details and news »abbinYour ValueYour ChangeShort position
(ticker: ABB) a year ago ("A Power Player With Plenty of Juice," Dec. 12, 2011). But global infrastructure spending has been disappointing in these austere times, and so have ABB's American depositary receipts, which finished the week at $19.42, flat over the past year in a strong if volatile market.

This year, earnings before interest, tax, depreciation, and amortization is expected to be flat at $5.7 billion, or $1.33 a share, on a modest increase in revenue, to $39.4 billion. That's below expectations of a year ago owing to the slowdown in China and uncertainty in Europe. Earnings are expected to resume growth in 2013.

Strong orders in the U.S. and a stable position in China will help support the stock in the near term, as management continues to focus on cutting costs. But economic growth remains the key. "Supported by a pickup in European transmission investment, we think that ABB's demand may surprise positively in 2013," say analysts at UBS, who rate ABB Buy with a $21.99 price target.

-- Jonathan Buck

Russian Informant's Mysterious Death Fuels Speculation About the Cause

Alexander Perepilichny's puzzling death in a posh suburb of London set off a panic in Britain's media last week. That's because the Russian businessman, 44, had been the source of bank records that launched a Swiss money-laundering investigation—and a Barron's story—of the sudden wealth gained by Moscow tax officials who in 2007 had approved the same-day refund of what amounted to $230 million in false claims (see "Crime and Punishment in Putin's Russia," April 18, 2011).

The scam famously victimized the hedge-fund firm Hermitage Capital and was followed by the 2009 prison death of Hermitage's whistle-blowing lawyer, Sergei Magnitsky. His death soured Russia's relations with governments and investors in the West, where legislatures are moving to impose sanctions on those they believe responsible for Magnitsky's arrest and beating death. Russian authorities have charged Magnitsky posthumously with tax fraud and declared the tax officials innocent dupes.

Barron's detailed the money movements that Perepilichny had revealed to Swiss authorities.

Perepilichny was found dead on Nov. 10 near the home he had rented in the gated community of St. George's Hill, a Beverly Hills-style enclave of the rich and famous. Coroners haven't yet been able to explain the sudden death of the apparently healthy Russian refugee. The news of the informant's death, in Wednesday's edition of The Independent, fueled speculation that he fell victim to a hit—like the former spy Alexander Litvinenko, poisoned with polonium-210 in a sushi bar back in 2006. Russian banker German Gorbuntsov survived a gunshot attack this year near the Canary Wharf financial district.

As we reported last year ("After Swiss Freeze Millions, Stepanov Swings Back," Barron's Online, May 31, 2011), Perepilichny had bought property in Dubai for Vladlen Stepanov, the ex-husband of the Moscow official who granted tax refunds to a group masquerading as officers of Hermitage Capital subsidiaries. Russia's interior ministry says those responsible have already confessed or died, but Hermitage founder Bill Browder alleges that the government is protecting the ringleaders. Last year, Stepanov told Russian papers that he had come by his wealth honestly and was just one of many investors swindled by Perepilichny.

Before Perepilichny sought asylum in Britain in 2009, his business expertise had been lauded by Fabien Pictet—scion of the fabled French banking family—who tapped Perepilichny to be a director of the London-listed
Ukraine Opportunity Trust
(ticker: UKRO.U.K.). At one time, Perepilichny's Cyprus-based firm, Aliondo Investments Limited, owned 8% of Kyivmetrobud, the leading tunneling and subway-construction company in Ukraine. In another venture, he briefly reigned as Russia's largest producer of condensed milk, canned fruit, and vegetables, before running into cash problems in 2008.

Evidence of some less-savory connections appeared this past summer in banking records uncovered by the Moscow paper Novaya Gazeta and the not-for-profit Organized Crime and Corruption Reporting Project. Those records showed Baikonur Worldwide—an offshore entity directed by Perepilichny—at the receiving end of funds that flowed from a network of shell companies whose names had previously popped up in investigations of money laundering for drugs and arms smuggling.

By 2010, a Perepilichny firm was facing tax-evasion charges in Russia, lodged by the very bureau overseen by Stepanov's ex-wife. That's the year he came to Hermitage, with the Credit Suisse records that Switzerland is now investigating.